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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
of foreign earned income. Tom paid $10,000 for amounts. This includes any expenses, losses,
housing expenses, of which $7,500 was for ex- and other normally deductible items that are al-
penses incurred from September 15 through locable to the excluded income. You can de-
the end of the year. Jane paid $3,000 for hous- 5. duct only those expenses connected with earn-
ing expenses in 2022, all of which were incurred ing includible income.
during her period of residence in Ghana.
Tom and Jane figure their housing amount These rules apply only to items definitely re-
jointly. If Tom claims the housing exclusion, Deductions and lated to the excluded earned income and they
their housing expenses would be $13,000 do not apply to other items that aren’t definitely
related to any particular type of gross income.
($10,000 + $3,000) and their base housing Credits These rules don’t apply to items such as:
amount, using Tom's 2022 period of residence
(August 17–December 31, 2022), would be • Qualified retirement contributions,
$6,727 ($49.10 × 137 days). Tom's housing Topics • Alimony payments,
amount would be $6,273 ($13,000 – $6,727). If, This chapter discusses: • Charitable contributions,
instead, Jane claims the housing exclusion, • Medical expenses,
their housing expenses would be limited to • The rules concerning items related to • Mortgage interest, or
$10,500 ($7,500 + $3,000) and their base hous- excluded income, • Real estate taxes on your personal resi-
ing amount, using Jane's period of residence • Contributions to foreign charitable dence.
(September 15–December 31, 2022), would be organizations, For purposes of these rules, your housing
$5,303 ($49.10 × 108 days). Jane's housing • Contributions to individual retirement deduction isn’t treated as allocable to your ex-
amount would be $5,197 ($10,500 – $5,303). arrangements (IRAs), cluded income, but the deduction for self-em-
• Taxes of foreign countries and U.S. ployment tax is.
territories, and
Form 2555 • How to report deductions. If you receive foreign earned income in a tax
year after the year in which you earned it, you
may have to file an amended return for the ear-
Use Form 2555 to claim the foreign earned in- Useful Items lier year to properly adjust the amounts of de-
come exclusion. You must file Form 2555 each You may want to see: ductions, credits, or exclusions allocable to your
year you are claiming the exclusion.
foreign earned income and housing exclusions.
Also, use Form 2555 to claim either the for- Publication
eign housing exclusion or the foreign housing 501 501 Dependents, Standard Deduction, Example. In 2021, you had $95,600 of for-
deduction. Form 2555 shows how you meet the and Filing Information eign earned income and $9,500 of deductions
bona fide residence test or physical presence allocable to your foreign earned income. You
test, how much of your earned income is exclu- 514 514 Foreign Tax Credit for Individuals did not have a housing exclusion. Because you
ded, and how to figure the amount of your al- 523 523 Selling Your Home excluded all of your foreign earned income, you
lowable housing exclusion or deduction. would not have been able to claim any of the
590-A 590-A Contributions to Individual deductions on your 2021 return.
Note. Don’t submit Form 2555 by itself. Retirement Arrangements (IRAs) In 2022, you received a $14,000 bonus for
work you did abroad in 2021. You can exclude
If you are a U.S. citizen or resident alien who 597 597 Information on the United States– $13,100 of the bonus because the limit on the
is a citizen or national of a U.S. treaty country, Canada Income Tax Treaty foreign earned income exclusion for 2021 was
you can claim the exclusion under the bona fide $108,700 and you have already excluded
residence test. You should fill out Parts I, II, IV, Form (and Instructions) $95,600. Since you must include $900 of the
and V of Form 2555. In filling out Part II, be sure 1116 1116 Foreign Tax Credit bonus ($14,000 − $13,100) for work you did in
to give your visa type and the period of your 2021 in income, you can file an amended return
bona fide residence. Frequently, these items 2106 2106 Employee Business Expenses for 2020 to claim $78.00 ($9,500 x
are overlooked. 2555 2555 Foreign Earned Income $900/$109,600) of the deductions. These are
the deductions allocable to the foreign earned
U.S. citizens and all resident aliens can Schedule A (Form 1040) Schedule A (Form 1040) Itemized income ($9,500) multiplied by the includible
claim the exclusion under the physical pres- Deductions portion of the foreign earned income ($900) and
ence test. You should fill out Parts I, III, IV, and
V of Form 2555. When filling out Part III, be sure Schedule C (Form 1040) Schedule C (Form 1040) Profit or Loss divided by the total foreign earned income for
to insert the beginning and ending dates of your From Business 2021 ($109,600).
12-month period and the dates of your arrivals SS-5 SS-5 Application for a Social Security
and departures, as requested in the travel Card
schedule. Contributions to Foreign
W-7 W-7 Application for IRS Individual
You must fill out Part VI if you are claiming a Taxpayer Identification Number Charitable Organizations
foreign housing exclusion or deduction.
See chapter 7 for information about getting If you make contributions directly to a foreign
If you are claiming the foreign earned in- these publications and forms. church or other foreign charitable organization,
come exclusion, fill out Part VII. you generally cannot deduct them. Exceptions
If you are claiming the foreign earned in- are explained under Canadian, Mexican, and
come exclusion, the foreign housing exclusion, Items Related to Israeli charities, later.
or both, fill out Part VIII. You can deduct contributions to a U.S. or-
Excluded Income
Finally, fill out Part IX if you are claiming the ganization that transfers funds to a charitable
foreign housing deduction. U.S. citizens and resident aliens living outside foreign organization if the U.S. organization
the United States are generally allowed the controls the use of the funds by the foreign or-
If you and your spouse both qualify to claim same deductions as citizens and residents liv- ganization or if the foreign organization is just
the foreign earned income exclusion, the for- ing in the United States. an administrative arm of the U.S. organization.
eign housing exclusion, or the foreign housing
deduction, you and your spouse must file sepa- If you choose to exclude foreign earned in- Canadian, Mexican, and Israeli charities.
rate Forms 2555 to claim these benefits. See come or housing amounts, you cannot deduct, Under the income tax treaties with Canada,
the discussion earlier under Separate House- exclude, or claim a credit for any item that can Mexico, and Israel, you may be able to deduct
holds. be allocated to or charged against the excluded contributions to certain Canadian, Mexican, and
Page 22 Chapter 5 Deductions and Credits
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